The study examined the impact of Value Added Tax on household consumption expenditure in the selected ECOWAS countries (Nigeria, Ghana, and Cote d’Ivoire). This study employed several panel estimation techniques such as the Pooled Mean Group (PMG), Mean Group (MG), and Dynamic Fixed Effect (DFE) to investigate the impact of Value Added Tax on household consumption expenditure in Nigeria, Ghana, and Cote d’Ivoire. The operational variables for this research work were Value Added Tax, household consumption expenditure, per capita income, and the inflation rate for the period 1994–2023. Data used for analysis were extracted from World Bank Development Indicators. Results showed that the long-run effect of VAT on household consumption is negative but statistically insignificant, indicating that VAT does not have a significant impact on household consumption expenditure in the long run. The study also showed a significant bidirectional causal relationship between Value Added Tax (VAT) and household consumption expenditure (HCE).

This indicates that changes in VAT not only influence household consumption but that household consumption patterns also affect VAT revenues. Consequently, the study recommended that sustainable per capita income growth should be promoted as a top priority, as higher income levels directly lead to increased household consumption. Moreover, VAT policies need to be carefully calibrated to balance the need for government revenue generation with the potential adverse effects on household consumption. Controlling inflation is another crucial aspect that requires immediate attention. Central banks and national governments must prioritize inflation control by implementing sound monetary policies that stabilize prices.